The Business Year

Hernan Rincon

COLOMBIA - Transport

Regional Leader

CEO and Executive President, Avianca Holdings

Bio

Hernan Rincon took office as as CEO of Avianca Holdings on 2016. He has served in leadership positions at Mirosoft, Ferag Americas, Cocelco, and Grupo Unysis. Rincón holds a Bachelor of Arts degree in Mathematics and Computer Science from the State University of New York and a Master of Science degree in Industrial Engineering from the Universidad de los Andes. He also holds a Master’s degree from Harvard’s John F. Kennedy School of Government, where he was awarded the prestigious Edward S. Mason Fellowship.

“Avianca is thinking about adding a second frequency to London, if the airline can get a slot for it.“

What major or achievements did Avianca reach this year?

It has been a year full of challenges. On one hand, we worked to recover our operation and service after the longest pilot strike in aviation industry, which took place last year. It went all the way to the supreme court of Colombia on three different occasions, and on three different occasions the ruling was in favor of Avianca. This year has been dedicated to recovering the operation from these difficult times. By the end of October Avianca had recovered 100% of its operation post illegal pilot’s strike, requiring no further wet leases and with resumed capacity deployment that today is in line with what we vision for Avianca’s network moving forward. On the other hand, in terms of fleet acquisition and expansion plans, in 2018 Avianca’s fleet renovation plan included the incorporation of 10 new airplanes: five A320s with Neo technology, which are 20% more fuel efficient and 50% less noisy, two A330-300, the largest ones of the fleet, two 320CEO and most recently the thirteenth Boeing 787- 8. The last one is assigned to European routes, particularly to the flight: Munich — Bogota. Therefore, Avianca Holdings S.A. and its subsidiaries have a consolidated operating fleet of 190 aircraft. In terms of connectivity, we also extended our network to new cities, such as Munich and Chicago from Bogota and Orlando and Chicago from Guatemala and El Salvador. In the south, we inaugurated the Lima-Mendoza direct flight to serve northern Argentina. We have also undertaken efforts to improve our efficiency and reduce our costs, mostly by using technology to improve the productivity of our staff. Therefore, understanding that digital transformation goes beyond the use of technology and that it is also a matter of leadership and corporate culture is a key step. Several processes have been implemented to keep the airline in the forefront, such as defining new structures and processes.

What does it mean for Avianca to be a regional leader, and how do you work to maintain this position?

Our strategy has two streamlines. The first one is to connect all Latin America to the rest of the world. We are doing this because we have a strong presence in Central America, Colombia, Peru, Ecuador, and Brazil. The idea is to serve all countries, and we do that today with the exception of Venezuela. Currently, we operate to 15 destinations in North America and four in Europe. In addition to this, we just signed a strategic commercial agreement with United and Copa Airlnes to basically integrate our network between North American and Latin America. The benefit to the consumer will be that we will plan together, serve the markets together, and coordinate our services across the region. Another part of our strategy is to compete through an exceptional service. At the end of the day, there are only two aspects that make a difference: service and on-time performance. We have chosen service as our leading differentiator. Before the flight, during the flight, and after the flight. In terms of customer service, we do not charge for bags, we provide food and drinks on board, we have VIP lounges in most airports where we operate, and we have a loyalty program that rewards passengers in different ways. Equally important, Avianca has an advanced call center, which receive all our customers inquiries and are able to solve issues seven days a week in Spanish, English, Portuguese and German. It is all about the experience for us, and we are proud that we have been selected several times over the last years by TripAdvisor, Kayak, Skytrax, and many other companies as the best airline in Latin America.

What is Avianca’s approach to finding new routes inside Colombia?

The first approach, which is the typical approach, is to listen to people and get to know where would they like have a new flight. they would like. In addition, there is a big demand from local governments and professional associations of connecting their cities with the rest of the country and the world via Avianca. The second source is a close analysis of the traffic in the country. We research where people are going and why, and through this approach we have learned about where people want to go. For instance, we learned that people wanted a direct flight from Bogota to Sincelejo in northern Colombia. Thus, we did a route analysis and worked together with local authorities to evaluate the possibility to make this happen. As a result, from October 12, Avianca operates a new direct flight to this city and the load factor has been above 85 percent since it started. Nowadays, we fly to 24 cities in Colombia, and all major cities are covered. There are only a few additional routes that can be operated. Therefore, we realize that smaller cities are not necessarily well served and we decided to do look for an alternative to operate within these destinations. Next year we will launch a specialize airline for regional transport within Colombia, which will operated on ATR fleet. We are in the process to have the final already have the approval from the authorities and then we will start the operations. Probably, we will have 15-20 aircraft dedicated to regional air transport.

Can you tell us about new services you are evaluating for Europe?

Avianca is thinking about adding a second frequency to London, if the airline can get a slot for it. Regarding to new routes, Zurich looks attractive as the next destination in Europe due to its location in center Europe. Moreover, the airline is also considering Rome and Paris. In terms of partnerships, Avianca is strengthening its partnership with Lufthansa in order to reinforce its presence and connectivity in Europe.

What can we expect from Avianca in 2019?

We will continue working hard on our current path. We will continue our renovation fleet plan, by adding eight new aircraft in 2019. It is important to notice that our fleet is the youngest in the Americas, with an average age of six or seven years. To maintain that, we will be decommissioning some older aircraft. For comparison, United and American airlines have a fleet with an average age of 12-14 years. In terms of service, we will still working on improving our on-time performance, thus itis the number one indicator of customers’ satisfaction. At the moment, our completion rate sits at 98%, which is just short of the world class rate of 99%. We aim to achieve 99% but it is not as easy as it seems. Our OTP rate, which is how often you land within 15 minutes of your advertised time, is around 78% while the world class rate is 85%.

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